Connecticut Avenue Securities Investor Presentation February Fannie Mae. Trademarks of Fannie Mae.

Transcription

1 Connecticut Avenue Securities Investor Presentation February Fannie Mae. Trademarks of Fannie Mae.

2 Disclaimer Copyright 2019 by Fannie Mae. Forward-Looking Statements. This presentation and the accompanying discussion contain a number of estimates, forecasts, expectations, beliefs, and other forward-looking statements, which may include statements regarding Fannie Mae s future financial performance and results, Fannie Mae s future dividend payments to and draws from Treasury, future benefits of investing in Fannie Mae products, Fannie Mae s future activities and their impact under the conservatorship scorecard, expectations for the single security and common securitization platform, future issuances of Connecticut Avenue Securities (CAS), future credit risk-sharing transactions and their impact, future plans regarding securitized reperforming loans and nonperforming loan sales, Fannie Mae s future funding needs, future economic and housing market conditions, and the future of housing finance reform. These estimates, forecasts, expectations, beliefs and other forward- looking statements are based on the company s current assumptions regarding numerous factors and are subject to change. Actual outcomes may differ materially from those reflected in these forward-looking statements due to a variety of factors, including, but not limited to, those described in Executive Summary, Forward-Looking Statements and Risk Factors in our annual report Form 10-K for the year ended December 31, 2018, and Form 10-Q for the quarter ended September 30, Any forward-looking statements made by Fannie Mae speak only as of the date on which they were made. Fannie Mae is under no obligation to, and expressly disclaims any obligation to, update or alter its forwardlooking statements, whether as a result of new information, subsequent events, or otherwise. No Offer or Solicitation Regarding Securities. This document is for general information purposes only. No part of this document may be duplicated, reproduced, distributed or displayed in public in any manner or by any means without the written permission of Fannie Mae. The document is neither an offer to sell nor a solicitation of an offer to buy any Fannie Mae security mentioned herein or any other Fannie Mae security. Fannie Mae securities are offered only in jurisdictions where permissible by offering documents available through qualified securities dealers or banks. No Warranties; Opinions Subject to Change; Not Advice. This document is based upon information and assumptions (including financial, statistical, or historical data and computations based upon such data) that we consider reliable and reasonable, but we do not represent that such information and assumptions are accurate or complete, or appropriate or useful in any particular context, including the context of any investment decision, and it should not be relied upon as such. Opinions and estimates expressed herein constitute Fannie Mae's judgment as of the date indicated and are subject to change without notice. They should not be construed as either projections or predictions of value, performance, or results, nor as legal, tax, financial, or accounting advice. No representation is made that any strategy, performance, or result illustrated herein can or will be achieved or duplicated. The effect of factors other than those assumed, including factors not mentioned, considered or foreseen, by themselves or in conjunction with other factors, could produce dramatically different performance or results. We do not undertake to update any information, data or computations contained in this document, or to communicate any change in the opinions, limits, requirements and estimates expressed herein. Investors considering purchasing a Fannie Mae security should consult their own financial and legal advisors for information about such security, the risks and investment considerations arising from an investment in such security, the appropriate tools to analyze such investment, and the suitability of such investment in each investor's particular circumstances. Fannie Mae securities, together with interest thereon, are not guaranteed by the United States and do not constitute a debt or obligation of the United States or of any agency or instrumentality thereof other than Fannie Mae Fannie Mae. Trademarks of Fannie Mae.

3 Contents Fannie Mae overview 4 Credit risk management 7 Program overview 12 CAS deal structure overview 23 Historical comparative analysis 48 Investor resources 56 Appendix 62 3

4 Who we are We are America s Housing Partner. Fannie Mae sits at the very heart of the housing industry. We purchase qualifying mortgages from lenders, bundle them into bonds and sell to investors. Lenders use their replenished cash to originate new mortgages, and we use ours to start the process again. This continuous flow of money promotes a healthy housing market. 1 in 3 homes are financed by us. We partner with lenders to create home purchase (single-family) and rental (multifamily) opportunities for millions of Americans across the country. 4

5 Our size and scale First Lien Mortgage Outstanding (Billions) As of September 2018, U.S. Single Family 1 st Lien mortgage debt outstanding totaled $10.3 trillion. Fannie Mae s share stood at $2.9 trillion, approximately 29% of the market. Source: Federal Reserve s Flow of Funds Fannie Mae has been the largest issuer of single-family mortgage securities in Market Share*: New Single-Family Mortgage-Related Securities Issuances In Billions The U.S. mortgage market is dominated by the 30-year Fixed-Rate Mortgage (FRM). Fannie Mae Issuance by Product Type year FRM 15-year FRM 20-year FRM 10-year FRM Other Fixed ARM We have provided $389 billion in mortgage liquidity across the country in 2018*. Private-label securities 3% Ginnie Mae 32% Fannie Mae 40% Freddie Mac 25% * For Quarter ended September 30,

6 Our single-family business Providing liquidity to the housing market and investment options to rates and credit investors. Proceeds from sale of MBS flow back to lender to fund new loans Lender Fannie Mae MBS Interest Rate Investor Originates loans Creates guaranteed MBS & non-guaranteed credit risk securities Purchases MBS & assumes interest rate risk Delivers loans Services loans Pays guaranty fee Securitizes loans. Guarantees principal & interest on MBS in exchange for guaranty fee 6 Credit Risk Securities Credit Investor Purchases credit risk securities & assumes portion of credit risk

7 Credit Risk Management 7

8 Credit risk management is the cornerstone of our business Participants in Credit Risk Transfer are investing in Fannie Mae as a credit risk manager the largest in the mortgage industry. Fannie Mae was the largest issuer of single-family mortgage securities in Q In Q3 2018, we provided $122 billion in singlefamily mortgage liquidity across the country. 3% 32% 40% Fannie Mae Freddie Mac Ginnie Mae Private-Label 25% Approximately 38%* of the loans in our single-family conventional guaranty book of business, measured by unpaid principal balance, were included in a reference pool for a credit risk transfer transaction. * As of September 30,

9 Our credit risk management approach Lender quality Loan quality Servicing quality Property management Lenders undergo a rigorous approval process prior to doing business with Fannie Mae and must meet ongoing net worth and business operational requirements Lenders are subject to ongoing oversight through comprehensive operational reviews to assess the effectiveness of their quality control procedures Loans must be underwritten in accordance with Fannie Mae guidelines. 90% (1) of loans that we acquire are evaluated through Desktop Underwriter, DU, the industry s most widely used automated underwriting system 100% of Fannie Mae s single family and condominium appraisals are assessed through Collateral Underwriter, our proprietary appraisal risk assessment tool Fannie Mae sets loan servicing standards, acts as Master Servicer, and provides oversight of loan Servicers We set standards for loss mitigation and borrower workout options. Our proprietary servicing tool, Servicing Management Default Underwriter TM (SMDU TM ) automates our servicing policies We conduct all property management and disposition in house, managing one of the industry s largest realestate owned portfolio disposing of over 1.6 million homes since 2009 Our strategy is to sell non-distressed homes to owner-occupants, helping to maximize sales proceeds, stabilize neighborhoods, and preserve the value of our guaranty book (1) Approximate 9

10 Credit risk management highlights Fannie Mae s industry-leading technology drives improved loan quality and better outcomes. Desktop Underwriter Collateral Underwriter 90% 1,900+ Lenders/Agents Loan deliveries in 2018 through DU 1 Since 2017, over $500BN in UPB delivered to Fannie Mae had one or more Day 1 Certainty components 23,000+ Users* 3,300+ Lenders/ Agents 34+Million Appraisals collected to date 4.7+ Million Appraisals viewed by lenders since launch Over half of our lenders actively use CU during origination process 100% of single-family and condominium loans go through CU as part of our QC process Servicing Management Default Underwriter Loss Mitigation Nearly all Delinquencies covered through SMDU 1-2 hours saved per loan with automated loss mitigation 1.7 million+ Homes disposed of since 2009 (industry s largest distressed portfolio) 9+ Million Visits in 2018 Over 850 servicers currently benefit from SMDU through B2B integration or through the SMDU User Interface Provides consistent decisioning for loss mitigation solutions 1 - Approximate *Since January 2015 Best execution approach to sell real estate based on NPV comparison to move-in ready home sold to owner occupant 100% of REO sales managed in-house: resulting in lower costs; higher sales prices, and reduced severities 10

11 Reducing credit losses through a fully digital and secured mortgage process Improve quality and drive efficiency by using data and eliminating manual processes throughout the entire lifecycle. EarlyCheck TM Single Source Validation Desktop Underwriter & Desktop Originator Application Program Interfaces Collateral Underwriter Production Execution Mortgage Technology Platform Pricing & Execution Whole Loan /MBS Servicing Execution Tool TM Servicing Marketplace Loan Delivery Fannie Mae Connect TM Loan Quality Connect TM Insights Servicing Servicing Management Default Underwriter TM Default Management Reporting System PAST Lots of paper Complex and manual Time consuming and costly FUTURE Reduced paper by connecting to source data Easier and more efficient Streamlined and automated 11

12 Program Overview 12

13 Fannie Mae s Connecticut Avenue Securities (CAS Program) Since 2013, we ve grown into the premier, award-winning mortgage credit risk transfer program in the industry, with: Industry-leading, innovative credit-risk management methodologies Thoughtful and consistent issuance approach Transparent and unique investor resources Maturing and liquid market Largest mortgage credit book in the industry. Innovative tools to improve the loan manufacturing process $36 billion issued since 2013 Transferring a significant portion of risk on over $1.1 trillion In unpaid principal balance of mortgage loans Transparent credit risk management process. Historical research dataset of approximately 39 million loans 13

14 CAS program highlights Large, geographically diversified loan pools provide broad exposure to U.S. housing market Fannie Mae serves as the credit risk manager acting as an intermediary between the lender and investor to set standards, manage quality, mitigate losses, and maximize value Ongoing, programmatic issuance Consistent structures promote liquidity and facilitate comparison of deals across time Broad Wall Street coverage, daily markets, and publishing research and analytics Pricing and trading volume available on TRACE and Bloomberg Deal Issuance Millions ($) CAS Issuance Active deal management includes receiving ratings on previously unrated CAS bonds Transparent investor resources including our investor analytical tool Data Dynamics YTD M-1 M-2 B B-1 Fannie Mae has issued $36 BN under the CAS program to date, and $26 BN in bonds remain outstanding as of January 3,

15 Transparent issuance calendar Calendar highlights periods in 2019 during which Fannie Mae may issue Connecticut Avenue Securities Fannie Mae may choose not to issue in some periods Issuance volumes and utilization of available issuance windows continue to be dependent on market conditions * Issuance windows in which Fannie Mae may issue up to two CAS deals, subject to market conditions. 15

16 CAS rating upgrades since program inception CAS bonds received 202 upgrades* since program inception Built in structural delevering, positive HPA and strong collateral performance have led to continuous upgrades M1 Rating Transition Matrix Pre-Upgrade Rating AAA AA+ AA AA- A+ A A- BBB+ BBB BBB- BB+ BB M AAA AA AA AA A A A BBB+ 17 BBB 9 BBB- M2 Rating Transition Matrix Pre-Upgrade Rating A+ A A- BBB+ BBB BBB- BB+ BB BB- B+ B B- NR M2 1 A+ 1 A 2 2 A- 5 BBB BBB BBB BB BB BB B B 1 B- * Bonds that receive multiple upgrades are shown in the tables multiple times. 16 Post-Upgrade Rating Post-Upgrade Rating Upgrade No Change Downgrade

17 CAS rating upgrades activity Percent of upgraded bonds by issuance year Vintage Year % 100% 100% 100% 100% 100% 100% 100% % 89% % 0% 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% % of M2 Bonds with Upgrades % of M1 Bonds with Upgrades As of February

18 NAIC designations CAS transactions received favorable NAIC designations for the 2018 filing year M1 Classes by NAIC rating (100% NAIC 1) M2 Classes by NAIC rating 5% 23% 72% NAIC 1 NAIC 1 NAIC 2 NAIC 3 18

19 CAS NAIC Designations & WALs M-1 NAIC Designations M-2 NAIC Designations Years 1-3 Years NAIC 1 The following CAS bonds received NAIC Designations for the first time in the 2018 filing year. Designation Deal CUSIP NAIC 1 CAS 2018-C01 1M XYS7 NAIC 2 CAS 2018-C01 1M XYX6 NAIC 1 CAS 2018-C02 2M XC28 NAIC 2 CAS 2018-C02 2M XC36 NAIC 1 CAS 2018-C03 1M XJ21 NAIC 2 CAS 2018-C03 1M XJ70 NAIC 1 CAS 2018-C04 2M XQ31 NAIC 3 CAS 2018-C04 2M XR63 NAIC 1 CAS 2018-C05 1M XX25 NAIC 3 CAS 2018-C05 1M XY24 The current WALs were run on January 30, NAIC designations as of the 2018 filing year Years 3-6 Years NAIC 1 NAIC 2 NAIC 3 The following CAS bonds received NAIC Designation upgrades in the 2018 filing year. Designation Deal CUSIP NAIC 1 CAS 2016-C03 2M XCT9 NAIC 1 CAS 2016-C05 2M XDK7 NAIC 1 CAS 2016-C07 2M XEC4 NAIC 1 CAS 2017-C01 1M XEP5 NAIC 2 CAS 2017-C02 2M XGP3 NAIC 1 CAS 2017-C03 1M XJX3 NAIC 2 CAS 2017-C04 2M XLT9 NAIC 1 CAS 2017-C05 1M XNX8 NAIC 2 CAS 2017-C06 1M XQX5 NAIC 2 CAS 2017-C06 2M XSX3 NAIC 2 CAS 2017-C07 1M XUX0 NAIC 2 CAS 2017-C07 2M XWX8 2 19

20 CRT quarterly trading volume and turnover Billions $8.00 $6.00 CRT quarterly trading volume $26B of secondary trading in CAS bonds in the last 12 months, approximately one times float of $26B $4.00 $2.00 $- 40% Q Q Q Q Q Q Q Q CAS trading volume (Quarterly) STACR trading volume (Quarterly) Quarterly CRT turnover* 30% 20% 10% 0% Q Q Q Q Q Q Q Q CAS STACR Source: Fannie Mae trading survey, Bloomberg *Note: total quarterly trading volume/average quarterly outstanding UPB 20

21 Connecticut Avenue Securities spreads Updated as of January

22 Program to date investor distribution M % 6% 80% Investor Type Asset Manager* 64% 61% 81% 83% 82% 80% Hedge Fund/Private Equity 19% 18% 4% 5% 7% 6% Insurance Company 12% 10% 12% 11% 10% 14% REIT 0% 0% 0% 1% 0% 0% Depository Institution/Bank 5% 11% 2% 0% 0% 0% M2 <1% 54% 8% 38% Investor Type Asset Manager 35% 50% 37% 43% 41% 38% Hedge Fund/Private Equity 63% 42% 55% 48% 46% 54% Insurance Company <1% 0% <1% 1% 3% <1% REIT <1% 2% 7% 8% 10% 8% Depository Institution/Bank 1% 6% <1% 0% 0% 0% B1 53% 2% 45% Investor Type Asset Manager 45% 45% Hedge Fund/Private Equity 50% 53% Insurance Company 1% 0% REIT 4% 2% Depository Institution/Bank 0% 0% 22 *Includes pensions, mutual funds, sovereign wealth funds, state/local government Source: Fannie Mae and dealers, primary issuance only

23 CAS Deal Structure Overview 23

24 CAS REMIC overview Investor Benefits Better treatment under REIT income and asset tests for tax purposes Removes tax impediments for non-u.s. investors to enable participation in non-rated tranches Helps insulate investors from potential future counterparty risk exposure to Fannie Mae Simplifies and aligns tax treatment of CAS with other mortgage related securities Fannie Mae Benefits Supports expansion of the CAS program investor base Achieves insurance accounting treatment for CAS, which aligns the timing of the recognition of CAS benefits with credit losses Enabling REMIC eligibility In order to facilitate this change, a REMIC tax election is made for a majority of single-family loans we acquire and securitize in MBS, beginning with loans in MBS pools issued on and after May 1, 2018 Extensive industry outreach indicates market agreement that there is no impact to MBS SIFMA s TBA Committee voted on the new structure proposal, identifying no issues that would impair the TBA eligibility The nature of our MBS, remittances, and cash flows to MBS investors, are unchanged Starting with 2018-R07, all CAS deals will be REMICs. 24

25 CAS REMIC key deal features Most of the features of the existing CAS structure are unchanged: Loan eligibility Capital structure Actual loss calculations Modification loss calculations High LTV Refinance program provisions (i.e., continuance of coverage for loans that refinance under the High LTV Refi program) Timing of cash flows and loss allocations Final maturity date/call date Offered as par-priced uncapped LIBOR floater Risk retention features CFTC Considerations: Like the previous CAS debt transactions, the CAS REMIC has been structured in a manner that does not involve any swaps; therefore the transaction is not considered a Commodity Pool 25

26 CAS REMIC structure mirrors legacy CAS program 1 Credit and prepayment performance of the underlying mortgage loans determines performance of CAS securities REMIC regular interests that are associated with the loans are conveyed to the CAS REMIC CAS REMIC Notes Underlying Loan Pool Loans acquired by Fannie Mae and deposited into MBS Class A Fannie Mae retains senior-most risk position Fannie Mae makes REMIC election on loans Loans in covered pool meet CAS Eligibility Criteria CAS REMIC Trust Bankruptcy Remote Trust Collateral Account 2 3 CAS REMIC Trust issues CAS securities: receives cash proceeds, which are deposited into Collateral Account CAS REMIC Trust pays interest to investors and repays principal less credit losses Class M-1 Sold to investors Class M-2 Sold to investors Class B-1 Sold to investors Class M-1H Fannie Mae retains min 5% vertical slice Class M-2H Fannie Mae retains min 5% vertical slice Class B-1H Fannie Mae retains min 5% vertical slice Class B-2 Retained by Fannie Mae If underlying mortgage loans experience losses, CAS notes are written down by a corresponding amount, starting with Class B and continuing in reverse sequential order. 26

27 Sample transaction overview (CAS 2019-R01) Class Loan Offered Notes Credit Support Est. $ Group million (Est. $MM) in offered notes (%) (1) Tranche Thickness (%) Expected Ratings (Fitch/Mstar) Expected 10% CPR (yrs) Expected Principal 10% CPR 2M-1 2 $ % 0.70% BBB-sf/A M-2 2 $ % 2.20% Bsf/BBB B-1 2 $ % 0.70% NR/NR B-2 2 $ % 0.50% N/A N/A N/A (1) The Maturity Date for all classes will be July Note: WALs and Windows shown at 10% CPR to Early Redemption. Transaction Timeline* January 2019 S M T W T F S February 2019 S M T W T F S Expected deal timing (approximate): Loan Data File: January 28, 2019 Pre-Marketing: January 30-February 1, 2019 CAS 2019-R01 Broad Investor Call: February 1, 2019 CAS 2019-R01 Execution: February 4-5, 2019 Closing and Settlement: February 13, 2019 *All dates are approximate Tape Release Pre-Marketing Broad Investor Call Execution Closing 27

28 CAS 2019-R01 structural overview Reference Pool May - August 2018 (Loans with REMIC election) Group 2 Loans* Original LTV % Class 2A-H 95.90% thick 4.10% credit support (initial) 4.40% credit support (required) Reference Pool contains only LTV loans Loans acquired May-August 2018 and securitized into MBS pools issued in May-August 2018 Notes are par-priced uncapped LIBOR floaters 12.5-year legal final maturity; Fannie Mae optional 10% clean up call and call starting in year 10 Minimum credit enhancement to unlock unscheduled principal is 4.40% Class 2M % thick 3.40% credit support Class 2M % thick 1.20% credit support Class 2B % thick 0.50% credit support Class 2M-1H (5% vertical slice) Class 2M-2H (5% vertical slice) Class 2B-1H (5% vertical slice) Credit events are based on actual losses 2M-2 class will offer exchange features with rated exchangeable notes Fannie Mae will retain 100% of the first loss tranche and at least 5% of all offered tranches All classes issued as REMICS and treated as debt-for-tax Class 2B-2H 0.50% thick; 0.00% credit support *Group 1 deals reference loans with % LTV Group 2 deals reference loans with % LTV All H tranches are reference tranches only and will not be issued 28

29 CAS 2019-R01 exchangeable notes 2M-2A/2M-2B/2M-2C Option Class 2M-2 $ Bsf / BBB- Credit Enhancement: 1.20% Principal Class 2M-2A $ BBsf / A- Credit Enhancement: 2.67% Class 2M-2B $ BB-sf / BBB Credit Enhancement: 1.93% Losses Tranching and coupon stripping provide optionality to meet investor needs Class 2M-2C $ Bsf / BBB- Credit Enhancement: 1.20% 2M-2A, 2M-2B and 2M-2C are LIBOR floaters with a margin equal to the 2M-2 To reduce the coupon, each exchangeable class can be stripped down to exchange into four P&I tranches, each with a different margin and corresponding fixed IO Multiple combinations of the floating rate and IO classes are available to meet various investor needs REIT-Targeted Added new Exchangeable combinations Notes: in 2018-C06 to allow investors to manage spread movement The introduction of the CAS REMIC, added new exchangeable notes giving REIT investors the option to convert 2M-2 and/or 2B-1 notes into separate interest components that distinguish income that counts favorably toward the REIT income test ( good REIT income ) from other income The exchange of the original note would create two pari passu notes: one that receives only good REIT income and another that receives all other income 29

30 Cash flow waterfall CAS cash flow structure is similar to typical RMBS transaction cash flows Principal payments and losses applied to the notes mirror the activity on the loans in the underlying Reference Pool Principal Payments are first allocated pro rata between senior notes and subordinate notes, then are applied sequentially to the subordinate notes starting with M-1 Deal must meet specified credit enhancement and delinquency tests for the subordinate notes to receive unscheduled principal payments Losses are applied in reverse sequential order beginning with class B-2H Principal payments and losses are allocated pro rata between the sold notes and the retained vertical slice Loan Group 2 ( LTV) Class 2A-H Class 2M-1 Class 2M-1H Principal Class 2M-2 Class 2M-2H Losses Class 2B-1 Class 2B-1H Class 2B-2H Senior Notes: A class Mezzanine Notes: M classes Subordinate Notes: B classes Retained Vertical Slice: 2M-1H, 2M-2H, 2B-1H 30

31 Credit events and allocation of losses Allocation of principal loss amounts Allocation of modification loss amounts 1 Class B2 - Principal 1 Class B2 - Interest 2 Class B1 - Principal 2 Class B2 - Principal 3 Class M2 - Principal 3 Class B1 - Interest 4 Class M1 - Principal 4 Class B1 - Principal 5 Class M2 - Interest 6 Class M2 - Principal 7 Class M1- Interest 8 Class M1 - Principal 31

32 Actual loss calculation principal losses Losses at Disposition (+) Loan Balance UPB at time of removal from reference pool (including any prior principal forgiveness amount) (+) Total Liquidation Costs Foreclosure Expense Property Preservation Expense Asset Recovery Expense Miscellaneous Holding Expenses/Credits Associated Taxes (+) Accrued Interest Unpaid interest from Last Paid Installment date through Disposition Date on interest-bearing UPB, based on net Note rate (Note Rate net of servicing fee or 35 bps, whichever is greater) (-) Total Proceeds Net Sales Proceeds Credit Enhancement Proceeds (Mortgage Insurance Proceeds) Repurchase/ Make Whole Proceeds Other Proceeds Expenses and proceeds associated with a credit event are passed through to noteholders 90 days after the disclosed Disposition Date (e.g., property sale date). Any remaining trailing expenses and proceeds are passed through on a monthly basis thereafter as received. 32

33 Modification losses Modification Borrower Impact Loss to Investor Interest Rate Reduction Reduces monthly interest rate borrower pays on loan obligation Losses passed through based on the difference between the modified and original note rate paid on the outstanding loan balance Principal Forbearance Term Extension Principal Forgiveness* Mortgage payments are suspended for a specific period of time; the portion of suspended principal does not bear interest and is due at termination of the loan Loan term is extended to reduce borrower monthly payments Outstanding principal loan balance is subject to a one time principal reduction based on established eligibility criteria Loss reflects foregone interest on non interest bearing portion of UPB No loss to investor At time of principal forgiveness, no modification losses will be passed through to noteholders The forgiven UPB amount will be treated as unscheduled principal at the time of the modification If the modified loan subsequently experiences a credit event, the amount of the principal forgiveness will be included in the credit event net loss (realized loss calculation) Modification losses are passed through to noteholders on a monthly basis once a permanent modification takes effect. No losses are incurred during a modification trial period (typically 3 months). *Fannie Mae does not anticipate that any loans referenced in CAS deals will be eligible for Principal Forgiveness *Principal Forgiveness Eligibility Criteria: 33

34 Collateral account: mechanics and eligible investments Collateral account Fannie Mae will deposit CAS REMIC note issuance proceeds into a collateral account held by the Bankruptcy Remote Trust Funds held in collateral account are used to return principal to CAS investors, as well as to compensate Fannie Mae for actual loan losses Third-party investment manager will invest funds subject to a pre-defined list of eligible investment criteria designed to meet the dual objectives of preservation of capital and timely liquidity (e.g. Short term US gov t obligations, money market funds, etc.) Investment guidelines designed to meet Rating Agency criteria to support up to a AAA future rating on CAS notes Eligible investment guidelines Eligible Investments are limited to: United States government obligations (guaranteed/backed or issued by the U.S government) without specified rating limits, if the obligations are scheduled to mature before the next Payment Date Repurchase obligations with a term scheduled to mature prior to next Payment Date on obligations issued or fully guaranteed by the U.S. government, entered into with a depository institution or trust company incorporated under the laws of the U.S. or any state thereof, provided that at time of investment the short-term issuer rating of such institutions shall have a credit rating of at least A1, P1, F1+ or equivalent from at least one U.S. nationally recognized statistical rating organization (NRSRO) Money market funds (MMF): investments in U.S. government money market funds or other liquidity products similar to U.S. government money market funds, provided they are designed to meet the dual objective of preservation of capital and timely liquidity 34

35 CAS 2019-R01 G2 reference pool selection process May 2018 August 2018 Total Acquisitions of $163.8BN Original UPB Reserved for Reinsurance Random Division Loans have REMIC election and were securitized in MBS issued in May - August 2018 Fully amortizing, generally 25-year and 30-year fixed rate*, 1-4 unit, first lien, conventional Not Refi Plus / Not HARP 80% < Loan-to-Value < 97% 0 x 30 payment history since acquisition Not subject to a repurchase request as of Cut-Off Date Not subject to any form of risk sharing with the loan seller and/or servicer 100% of May, June, July and August 2018 Available Loans Connecticut Avenue Securities: $28.08BN Current UPB *** * All loans will have terms greater than 240 months and less than or equal to 360 months. Other minimal exclusion criteria apply. ** Current UPB Reflects CAS 2019-R01 November 2018 Book Profile. Numbers may not foot due to rounding. Fannie Mae acquires HARP loans under its Refi Plus initiative, which provides expanded refinance opportunities for eligible Fannie Mae borrowers. 35

36 Acquisition profile 36

37 CAS 2019-R01 Group 2 and 2018-C06 Group 2 reference pool summary CAS 2019-R01 G2 CAS 2018-C06 G2 Reference Period May Aug 2018 Feb Mar 2018 Number of Reference Obligations 115,586 43,325 Aggregate Original Principal Balance $28,460,870,000 $10,656,900,000 Aggregate Current Principal Balance $28,078,924,863 $10,527,759,933 Average Original Principal Balance $246,231 $245,976 Average Current Principal Balance $242,927 $242,995 Gross Mortgage Rate 4.78% 4.34% Weighted Average Remaining Term Weighted Average Original Term Weighted Average Loan Age Weighted Average Original LTV 92.8% 92.5% Weighted Average Original CLTV 92.9% 92.5% Weighted Average DTI 38.3% 38.2% Weighted Average FICO % Refinance 4.0% 10.9% % Cash-out 0.0% 0.0% % No Cash-out 4.0% 10.9% %Owner Occupied 95.9% 96.2% % SFR/PUD 89.4% 89.2% Top 5 Geographic Concentration California % California % Texas % Texas % Florida % Florida % Georgia % Arizona % Washington % Washington % Cohort CAS 2019-R01 G2 CAS 2018-C06 G2 Delta FICO < % 3.87% 0.05% FICO < 660; CLTV > % 0.67% 0.00% FICO < 660; CLTV > % 2.45% 0.10% FICO < 660; Risk Layer > % 2.20% -0.19% FICO < 660; Risk Layer > % 0.30% -0.10% FICO < 660; Risk Layer > % 0.00% 0.00% CLTV > % 18.42% 2.22% CLTV > % 61.22% 2.55% Risk Layer > % 64.50% -2.04% Risk Layer > % 14.05% -0.64% Risk Layer > % 0.05% 0.01% LTV < % 38.96% -2.54% DTI 22.31% 22.56% -0.25% Risk Layer is defined as investor property, cash-out refinance, DTI>45 (rounded to nearest integer) and single borrower. The CAS 2019-R01 pool profile is available on Data Dynamics: 37

38 Total mortgage origination volume and FICO Credit profile fluctuates with the origination cycle 760 $ $700 $600 FICO $500 $400 $300 $200 $100 $ Billion 700 $0 Origination Month Total Volume (RHS) Average FICO Source: Fannie Mae. Origination estimates for aggregate market. 38

39 Total market credit profile trend WA FICO WA DTI % % % % % % % 1/1/2014 4/1/2014 7/1/ /1/2014 1/1/2015 4/1/2015 7/1/ /1/2015 1/1/2016 4/1/2016 7/1/ /1/2016 1/1/2017 4/1/2017 7/1/ /1/2017 1/1/2018 4/1/2018 7/1/ /1/2018 1/1/2014 4/1/2014 7/1/ /1/2014 1/1/2015 4/1/2015 7/1/ /1/2015 1/1/2016 4/1/2016 7/1/ /1/2016 1/1/2017 4/1/2017 7/1/ /1/2017 1/1/2018 4/1/2018 7/1/ /1/2018 Fannie Mae Total Market Fannie Mae Total Market Source: Fannie Mae, MBS issuance data. Includes 25-year and 30-year fixed rate loans. Total Market reflects issuance data from Fannie Mae, Freddie Mac, and Ginnie Mae. Origination month is derived from first payment date 39

40 DU model updates Improvements in Income Data Since Crisis Require the collection of more and higher-quality income data Better quality control tools resulted in significant reductions in loan defect rates Day 1 Certainty introduced independent data verification capabilities These factors have improved the quality of the data used to underwrite loans DU 10.1 (July 2017) Enabled loans with DTI ratios above 45% (up to 50%) to rely on DU s comprehensive risk assessment Removed DU model overlays which had set maximum LTV ratio and minimum reserves requirements for those loans Each loans meets our risk appetite, as modeled in DU 40% 35% 30% 25% 20% 15% 10% 5% 0% DTI % > 45* 1/1/2000 1/1/2001 1/1/2002 1/1/2003 1/1/2004 1/1/2005 1/1/2006 1/1/2007 1/1/2008 1/1/2009 1/1/2010 1/1/2011 1/1/2012 1/1/2013 1/1/2014 1/1/2015 1/1/2016 1/1/2017 1/1/2018 Dynamic Credit Management DU 10.2 (March 2018) Revised DU s risk assessment to limit risk layering Fewer DU Approve recommendations on loans that have multiple higher-risk characteristics DU 10.3 (December 2018) Enhanced DU s management of multiple risk layers Six months of reserves for cash-out refinances with DTI over 45% to address increase in high DTI acquisitions 25% 20% 15% 10% 5% 0% % > 50* 1/1/2000 1/1/2001 1/1/2002 1/1/2003 1/1/2004 1/1/2005 1/1/2006 1/1/2007 1/1/2008 1/1/2009 1/1/2010 1/1/2011 1/1/2012 1/1/2013 1/1/2014 1/1/2015 1/1/2016 1/1/2017 1/1/ *Rounded to nearest integer

41 Group 1/Group 2 loss comparison Group 1 Proceeds as % of Defaulted UPB Group 2 Proceeds as % of Defaulted UPB 120% 120% 100% 100% 80% 80% 60% 60% 40% 40% 20% 20% 0% 0% CE Proceeds Sales Proceeds RMW* Other** CE Proceeds Sales Proceeds RMW* Other** Default Rate Severity Rate 18% 16% 14% 12% 10% 8% 6% 4% 2% 0% 60% 50% 40% 30% 20% 10% 0% Group 1 Group 2 Group 1 Group 2 *RMW = Repurchase Make Whole proceeds **Other = Amounts other than sales proceeds including redemption proceeds received from the mortgagor 41

42 Private mortgage insurance on high LTV loans All loans in CAS deals with original loan-to-value ratios greater than 80% are required to have mortgage insurance (MI) in place provided by one of eight approved and active Mortgage Insurance Companies Borrower-paid MI: the borrower makes a monthly payment as part of his/her mortgage payment Approximately 84% (1) of MI is borrower-paid. Monthly MI payment is typically 7.0% - 7.5% (2) of the borrower s total mortgage payment at loan inception. MI can be canceled by borrower once loan reaches 78% LTV (and can be canceled by the borrower in other circumstances). Lender-paid MI: the lender pays for the MI upfront and charges the borrower a higher interest rate Approximately 16% (1) of MI is lender-paid. Lender-paid MI cannot be cancelled because the payment is built into the mortgage rate. If a loan goes to disposition, the MI company is obligated to pay Fannie Mae a claim based on the MI coverage percentage. This payment is passed through to the CAS investor as additional disposition proceeds and reduces the loss. LTV Range (%) Standard MI Coverage (%) % 35.0% % 30.0% % 25.0% % 12.0% Note: most loans have standard coverage; however, levels may differ on some loans this is disclosed on the loan-level deal file If the MI company fails to pay a claim per their contractual obligation, Fannie Mae will step in and cover the MI contractual benefit amount on that loan. Investors are not exposed to MI Company counterparty risk. (1) Figures represent breakdown of MI payments from CAS 2018-C04 deal (2) Given the following key assumptions: 90% LTV, 740 FICO, MGIC Mortgage Insurance rates (44 bps for a 740 FICO loan), No Curtailment 42

43 HomeReady HomeReady is aimed at making homeownership more affordable for creditworthy low- and moderate-income borrowers: Borrower s income must be less than or equal to 100% of area median income (AMI), or The property must be located in a low income census tract (31% of census tracts as of 2017) HomeReady reduces borrower costs: Reduced MI requirements for LTV>90 result in lower monthly payment Lower loan-level price adjustments (LLPAs) help to reduce the rate and/or fees charged to the borrower HomeReady loans are underwritten through DU to the same performance expectations as all other Fannie Mae loans Since rollout in late 2015, HomeReady has captured an increasing share of our low/mod loan acquisitions Previous community lending programs required lenders to manually identify low/mod borrowers With HomeReady, DU proactively identifies eligible borrowers, simplifying the process for lenders This automation allows more eligible borrowers to receive a HomeReady offer Because of the lower monthly payments, lenders can offer eligible borrowers more competitive pricing than under a non-homeready loan 45% 40% 35% 30% 25% 20% 15% 10% 5% 0% 1/1/ /1/ /1/2001 High LTV share of Low/Moderate Income Borrowers* 10/1/2002 9/1/2003 8/1/2004 7/1/2005 6/1/2006 5/1/2007 4/1/2008 3/1/2009 2/1/2010 1/1/ /1/ /1/2012 <=50 AMI <=100 AMI 10/1/2013 9/1/2014 8/1/2015 7/1/2016 6/1/2017 5/1/2018 *Share of Acquisition UPB for loans with original LTV >80% where borrower income is less than or equal to the Area Median Income (AMI) 43

44 CAS 2019-R01 G2 ( LTV) HomeReady loan profile HomeReady Loan Profile: Range of OLTV Current UPB WA LTV WA CLTV WA DTI WA FICO Risk Layers* % 84.1% 84.3% 40.1% % 89.6% 89.7% 39.9% % 94.7% 94.7% 40.9% % 97.0% 97.0% 40.7% All 100.0% 94.6% 94.6% 40.6% Approximately 0.13%, by loan count of HomeReady loans in the reference pool were underwritten through DU using boarder income. *Risk Layers in this view are defined as an investor property, cash-out refinance, DTI > 45 (rounded to the nearest integer), and FICO <

45 Standard Selling Guide vs HomeReady Product feature Standard guide HomeReady Purchase and LCOR* Only Maximum LTV (Refer to Fannie Mae Eligibility Matrix for full list) 95% LTV for 1-unit properties, principal residence Up to 97% LTV allowed for First-Time Homebuyers. LTV > 95% must be underwritten through DU LCOR transactions LTV>95-97% must be owned or securitized by Fannie Mae. Same as standard Maximum DTI 50% Same as standard Rental income from subject property and boarder income Non-occupant co-borrower (such as a parent) Documented rental income from subject property is allowed for 2-4 unit properties and investment properties Boarder income generally not allowed Permitted, with criteria for amount of down payment and DTI required from occupant borrower Documented rental income not eligible for investment properties Rental income from a 1-unit property with accessory unit permitted Documented boarder income (e.g., rent paid by roommate) may be allowed if it meets guidelines. Same as standard Mortgage Insurance Required for LTV > 80% Reduced MI coverage allowed for approved lenders with pricing adjustment Gifts, grants, Community Seconds, cash-on-hand and sweat equity as a source of funds for down payment and closing costs Minimum borrower contribution required from borrower s own funds (whether or not gifts, grants etc, are also present) Gifts, grants, and Community Seconds are allowed as sources of down payment and closing costs with appropriate documentation Cash-on-hand and sweat equity generally not allowed LTV <=80%: 0% LTV >80%: 1-unit property principal residence: 0% 2-4 unit property: 5% Non-traditional credit Allowed with appropriate documentation Same as standard MI coverage percentage reduced for loans with LTV > 90% Same as standard, plus: Cash-on-hand may be allowed with appropriate documentation Sweat equity may be allowed under qualifying programs if so, max LTV is 95% and borrower must contribute at least 3% from own funds for down payment Same as standard for LTV <=80%: 0% LTV >80%: 1-unit principal residence property: 0% 2-4 unit property: 3% Manufactured housing up to 95% and HomeStyle Renovation (approved lenders) up to 95% May be allowed up to 95%, manufactured housing must be underwritten through DU Same as standard 45 *LCOR = Limited Cash-Out Refinance (aka rate/term refi)

46 High LTV refinance eligibility timeline The CAS program has been designed so that the impact of a borrower s ability to refinance an underwater loan is consistent across all CAS deals Loan time period Acquired on or before 5/31/2009 6/1/2009 through 9/30/2017 Note date on or after 10/1/2017 Borrower Options Borrower Options Do borrowers have the ability to refinance a loan where the LTV based on current property value exceeds standard Fannie Mae eligibility? Yes No Yes Applicable refinance program name HARP / Refi Plus None High LTV Refinance Option CAS Treatment How does the borrower s refinance option (or lack thereof) impact CAS Deals? CAS Treatment N/A, no eligible loans are included in CAS deals Loan remains in CAS deal because borrower does not have ability to refi When borrower exercises high LTV refinance option, loan remains in CAS deal Applicable CAS Deals None CAS 2013-C01 through CAS 2018-C01 CAS 2018-C02 forward Applicable CAS Reference Pool time period N/A 7/1/2012 through 9/30/ /1/2017 forward 46 CAS Treatment

47 High loan-to-value (HLTV) refinance option The HLTV Refinance Option is a proactive approach that provides refinance opportunities to borrowers with existing Fannie Mae mortgages who are making their mortgage payments on time but whose LTV ratio for a new mortgage loan exceeds the maximum allowed for standard limited cash-out refinance options in the Selling Guide. HLTV Program Eligibility Requirements Existing mortgage loan is owned by Fannie Mae and has an Origination Date on or after October 1, 2017 Mortgage loan is 15 months seasoned Mortgage loan is current No 30-day mortgage delinquencies during the most recent six-month period, and no more than one 30-day delinquency in months 7-12 Borrower can refinance under this option more than once as long as all other requirements are met Applicability to CAS Loans that are refinanced through the HLTV Refinance Option will remain in the reference pool for their respective CAS transactions Interest rate reductions will not constitute Modification Events and will not impact CAS investors Principal reductions due to borrower prepayments or lender incentives made under the HLTV Program will be treated as partial prepayments. Principal forgiveness is not part of the HLTV Program Loan reporting will reflect any changes to terms made pursuant to the HLTV Program Because these loans represent a replacement of existing risk, a continuance of coverage approach for CAS deals provides for this risk to remain with existing CAS investors. 47

48 Historical Comparative Analysis 48

49 Group 2 ( OLTV) - historical acquisition profile Orig year Loan Count Original UPB WA Note Rate WA FICO WA DTI WA OLTV WA OCLTV % 2nd Lien 1 % Investor % Refi 2 % TPO 3 % CA WA Risk Layers ,172 $6.0B 7.87% % 1.4% 12.2% 51.3% 11.2% ,070 $50.8B 8.21% % 1.9% 10.7% 54.7% 10.8% ,519 $89.0B 7.08% % 2.5% 38.4% 54.8% 10.9% ,034 $74.2B 6.65% % 3.5% 37.0% 56.9% 9.6% ,403 $75.5B 5.85% % 3.3% 42.3% 58.3% 7.7% ,038 $31.9B 5.97% % 3.9% 28.8% 57.7% 4.5% ,091 $26.8B 5.97% % 4.4% 34.2% 59.1% 2.3% ,246 $22.5B 6.55% % 4.9% 35.5% 61.0% 2.0% ,873 $41.1B 6.50% % 5.8% 43.4% 67.6% 4.6% ,650 $55.6B 6.19% % 3.4% 29.4% 62.9% 13.3% ,603 $34.5B 5.02% % 0.0% 41.1% 45.7% 8.9% ,206 $27.3B 4.72% % 0.0% 31.6% 54.8% 10.4% ,352 $35.8B 4.59% % 0.0% 26.4% 59.6% 12.4% ,013 $73.2B 3.87% % 0.0% 32.8% 55.1% 13.6% ,397 $93.5B 4.16% % 0.1% 21.9% 50.0% 13.2% ,432 $84.7B 4.49% % 0.2% 14.8% 45.1% 12.5% ,288 $107.1B 4.17% % 0.2% 17.1% 42.5% 11.8% ,257 $124.5B 3.90% % 0.2% 16.7% 42.7% 11.9% ,477 $103.9B 4.29% % 0.4% 8.6% 48.2% 11.4% 0.16 Only loans with LTV between are included. Excludes loans with CLTV >97 Statistics weighted by origination UPB 1 Loans with CLTV more than 3 % greater than LTV are assumed to have second liens. 2 Includes both Rate/Term and Cashout Refinances. 3 Includes Broker and Correspondent originations. 4 Risk Layers defined as: Investor Property, Cash-out Refinance, DTI > 45 (rounded to the nearest integer) & FICO < 680 Source: Fannie Mae January 2019 Data Release 49

50 Group 2: Historical loss performance re-weighted to CAS R01 profile Realized Loss Performance Default Pipeline Implications CAS 2019-R01 G2 Equivalent Perf. (Not Including Default Pipeline)¹ Rem. CAS Window (Months) 3 Total Comped Loss Remaining 12.5 Year Rem. CAS Unsold REO Active D180 Orig Year UPB Pool Factor Net Loss Mod Loss 2 Total Loss Window % 3 % 4 % 5 Net Loss 6 Mod Loss B 0.57% 0.14% 0.05% 0.19% % 0.02% 0.02% 0.04% 0.00% 0.04% B 1.13% 0.27% 0.07% 0.34% % 0.01% 0.03% 0.12% 0.00% 0.12% B 2.31% 0.48% 0.13% 0.62% % 0.03% 0.06% 0.25% 0.02% 0.27% B 5.35% 0.89% 0.25% 1.13% % 0.05% 0.11% 0.57% 0.05% 0.62% B 7.03% 1.77% 0.48% 2.25% % 0.09% 0.19% 1.10% 0.14% 1.24% B 8.98% 3.72% 0.90% 4.62% % 0.14% 0.29% 2.38% 0.35% 2.73% B 8.68% 5.01% 1.54% 6.56% % 0.20% 0.32% 2.99% 0.66% 3.65% B 10.10% 5.18% 2.22% 7.39% % 0.28% 0.42% 2.85% 1.09% 3.94% B 7.48% 2.15% 1.38% 3.53% % 0.13% 0.26% 1.31% 1.00% 2.31% B 11.08% 0.31% 0.05% 0.36% % 0.04% 0.07% 0.44% 0.10% 0.54% B 18.22% 0.08% 0.01% 0.09% % 0.03% 0.07% 0.10% 0.02% 0.12% B 23.23% 0.04% 0.01% 0.04% % 0.02% 0.09% 0.04% 0.03% 0.07% B 43.82% 0.02% 0.00% 0.02% % 0.03% 0.08% 0.03% 0.00% 0.03% B 43.43% 0.01% 0.00% 0.02% % 0.03% 0.12% 0.02% 0.00% 0.02% B 44.13% 0.01% 0.01% 0.01% % 0.04% 0.20% 0.01% 0.01% 0.02% B 64.86% 0.00% 0.00% 0.01% % 0.03% 0.19% 0.01% 0.00% 0.01% B 83.11% 0.00% 0.00% 0.00% % 0.02% 0.16% 0.00% 0.00% 0.00% B 91.33% 0.00% 0.00% 0.00% % 0.01% 0.10% 0.00% 0.00% 0.00% 1. Reflects historical loss rates re-weighted to reflect the FICO, CLTV, & Risk Layer Count distribution of CAS 2019-R01 G2 2. Reflects interest income forgone due to loan modifications (includes both interest rate and principal forbearance modifications) 3. Calculated as average loan age subtracted from 150 months (CAS maturity) 4. Calculated as default UPB for foreclosed loans that have yet to be disposed divided by total vintage origination UPB 5. Calculated as last UPB for loans that were in D180+ delinquency as of the last activity period in the public dataset divided by total vintage origination UPB 6. In addition to the re-weighting, historical loss rates used in the comp process have been revised to reflect the ~4.78% WAC of the CAS 2019-R01 G2 7. Reflects historical mod loss re-weighted to reflect the FICO, CLTV, & Risk Layer Count distribution of CAS 2019-R01 G2 50

51 Historical loss performance re-weighted to CAS 2019-R01 profile CAS 2019-R01 G2 Comped Loss Performance with Pipeline Consideration ( LTV Loans) 5% 4% 4.40% 3.40% 3% 2% 1% 1.20% 0.50% 0% Net Loss Comped Pipeline Estimated Mod Cost M2 Attach M1 Attach Min. CE B1 Attach 1. Bars reflect historical cumulative loss performance re-weighted to the CAS 2019-R01 G2 profile across FICO/CLTV/Risk Layer distribution 2. Estimated Mod Loss re-weighted to the CAS 2019-R01 G2 profile across FICO/CLTV/Risk Layer distribution (risk layers defined as: Investor property, cash-out refinance, DTI > 45 (rounded) and single borrower) 3. Comped Pipeline equal to 25% of the previously defined loss pipeline re-weighted across the FICO/CLTV/Risk Layer distribution Source: Fannie Mae Data Dynamics. 51

52 Group 2: Historical loss performance re-weighted to CAS R01 profile 5.0% 4.5% 4.0% Group 2 ( OLTV) Comped Historical Loss % of Origination UPB 3.5% 3.0% 2.5% 2.0% 1.5% 1.0% 0.5% 0.0% Months From First Payment M2 Attach M1 Attach Min. CE B1 Attach 1. Curves reflect historical cum loss performance re-weighted to the CAS 2019-R01 Group 2 profile across FICO/CLTV/Risk Layer distribution 2. Comped loan modification concession (mod loss) for a given vintage has been distributed evenly across each point on the respective curve 3. A projected terminal loss has been calculated for all vintages with fewer than 150 months of activity. Projected terminal loss calculated by adding 25% of the default pipeline to the cumulative loss (default pipeline defined as foreclosed loans without a property disposition and loans that were in D180 delinquency as of the most recent available activity record) Source: Fannie Mae January 2019 Data Release 52

53 Loss/severity statistical summary (Group 2) Loss/Severity Summary Characteristics by Origination Year (Group 2) (Reflects loan status in performance dataset for activity through Q3 2018) Loan Population: loans with zero balance code of '02', '03', '09', '15' with non-null Disposition dates Origination Year Total Default UPB ($M) 1 $2,630 $1,850 $2,831 $1,934 $2,956 $3,209 $6,751 $5,044 $609 $173 $122 $130 $161 $126 $71 $22 $28,617 Default Rate (%) 1.8% 2.5% 3.7% 6.1% 11.0% 14.2% 16.4% 9.1% 1.8% 0.6% 0.3% 0.2% 0.2% 0.1% 0.1% 0.0% 10.5% EXPENSES: Delinquent Interest 11% 11% 11% 11% 11% 12% 12% 11% 7% 7% 7% 6% 6% 6% 5% 4% 11% Total Liquidition Exp. 11% 13% 13% 13% 11% 10% 9% 9% 8% 10% 11% 12% 11% 9% 8% 6% 11% Foreclosure 4% 5% 4% 4% 3% 3% 3% 3% 2% 3% 3% 3% 3% 3% 3% 2% 3% Property Preservation 3% 4% 4% 4% 3% 3% 2% 2% 3% 3% 4% 4% 4% 3% 3% 1% 3% Asset Recovery 0% 0% 1% 1% 1% 0% 0% 1% 1% 1% 1% 1% 0% 0% 0% 0% 1% Misc. Holding Expenses/Credits 1% 1% 1% 2% 2% 2% 1% 1% 1% 1% 1% 1% 1% 1% 1% 1% 1% Associated Taxes 2% 3% 3% 3% 3% 3% 2% 2% 2% 2% 3% 3% 2% 2% 2% 1% 3% Total Costs 123% 124% 124% 125% 123% 122% 121% 119% 116% 116% 118% 118% 117% 115% 113% 110% 122% PROCEEDS: Net Sales Proceeds 75% 71% 71% 67% 61% 56% 57% 62% 74% 80% 83% 84% 81% 81% 85% 88% 62% Credit Enhancement 24% 23% 21% 22% 23% 24% 23% 22% 19% 21% 22% 22% 26% 26% 20% 14% 23% Repurchase/Make Whole 5% 4% 2% 2% 3% 5% 8% 10% 4% 2% 1% 0% 0% 0% 0% 0% 5% Other 3% 3% 3% 2% 2% 2% 2% 2% 1% 1% 1% 2% 2% 2% 3% 2% 2% Total Proceeds 107% 101% 97% 93% 88% 87% 90% 96% 98% 104% 108% 108% 110% 109% 108% 104% 92% Severity 15.5% 23.0% 27.0% 31.3% 34.1% 35.2% 31.5% 23.7% 17.6% 12.1% 10.6% 9.3% 7.3% 6.3% 5.2% 5.2% 29.5% Total Net Loss ($M) $408 $426 $764 $605 $1,008 $1,130 $2,126 $1,193 $107 $21 $13 $12 $12 $8 $4 $1 $7,837 1 Default UPB, expenses and proceeds in this view are for completed foreclosures only. These are defined as loans with a zero balance code of '09', '03', '02', or '15' and non-null disposition dates. Default rate is calculated as the sum of default UPB divided by the origination UPB. Expense and proceed line items are a percentage of default UPB. Source: Fannie Mae January 2019 Data Release 53

54 Historical loss performance re-weighted to Group 2 CAS profiles G2 Deals: Total Loss Rate Comped to 2006 Vintage Year 6 Fixed Severity Actual Loss 5 % of Origination UPB M1 M2 B Retained B Total Loss Rate 1. Dots reflect historical total loss performance re-weighted to all of Group 2 CAS profiles across FICO/CLTV/Risk Layer distribution 2. For deals up to and including CAS 2015 C03, total loss is calculated in accordance with the fixed severity schedule; for the others, total loss is calculated from actual net, modification and pipeline losses 54

55 Cumulative HPA by deal (G2) WA Cumulative HPA by Deal G2 45% 40% 35% 30% 25% 20% 15% 10% 5% 0% Source: FHFA three-digit zip code house price index. 55

56 Investor resources 56

57 Data Dynamics 57

58 Data Dynamics (illustrative examples) Historical Performance Data Gain insights into historical performance trends and relationships to credit performance How do risk profiles compare across vintages? How have loans in different vintages performed over time, from a delinquency, prepay, default, severity, and loss perspective? What is the detailed breakdown of net loss, expenses and proceeds? CAS Transaction Issuance and Performance View profile composition for outstanding deals, and monthly performance analysis What is the current and at-issuance risk profile of loans underlying existing CAS deals? How has deal collateral performed through each remittance period? In which risk bucket is most of UPB in each deal concentrated? How does profile/performance compare to other deals? Historical Comparative Analysis Gather insights into potential deal performance by comparing deals across various historical outcomes How would this deal have performed with its risk profile if reference pool was originated in a different year? (comparative) How does the total loss of a comparative deal compare across different vintage years? How does a specific bond's credit enhancement level compare to the historical loss experience of similar loans? 58

59 Historical loan-level performance data Provides historical monthly loan performance data on a portion of our single-family book of business to promote better understanding of the credit performance of Fannie Mae mortgage loans Includes a subset of our fully amortizing, full documentation, single-family, conventional fixed-rate mortgage acquisitions since January 2000, and is updated on a quarterly basis to include a new quarter of acquisitions and performance Over 50 data elements per loan, including key loan risk factors, loan term characteristics, collateral characteristics, servicing data, and disposition data Investor resources including file layout, glossary, FAQs, web tutorials, and statistical summaries support download of the dataset Notable Enhancements One-click download feature to ease file-download experience Inclusion of one million loans that were modified through HARP, supporting market analysis of high loan-to-value refinance assistance programs Inclusion of fixed-rate loans with 5 year to 25 year terms 59

60 CAS loan-level data disclosure Fannie Mae makes over 100 loan-level disclosure fields available to support CAS analysis Fields include key loan risk factors, loan term characteristics, collateral characteristics, servicing data, and disposition data, such as (not limited to): Loan and Borrower Characteristics Collateral Characteristics Servicing Data Loan Term Characteristics Property Type Number of Borrowers Number of Units HomeReady Program Indicator, and First Time Home Buyer Indicator Original Debt to Income Ratio Original Loan to Value Ratio (LTV) and Combined LTV Ratio (CLTV) High Loan-to-Value Refinance Indicator Borrower FICO and Co-Borrower FICO scores (at origination, deal issuance, and ongoing) Three digit zip code Occupancy Type Metropolitan Statistical Area Property Inspection Waiver Flag (1) Servicer Name Mortgage Insurance Cancellation Indicator Loan Payment History Modification Flag Original and Current Interest Rate Original Loan Term Loan Age Original and Current UPB Origination Date Maturity Date Reason and Date as to why a loan balance went to zero Current Loan Delinquency Status Disposition Data (1) Available beginning with CAS 2017-C07 Last Paid Installment Date Foreclosure Date Detailed Proceed Fields Original and Current List Price and Date Disposition Date Detailed Expense Fields 60

61 Contact Us Information is available for investors and potential investors about Fannie Mae's products, the company's financial performance, and disciplined management of credit risk and interest rate risk. For more information, please contact us: 800-2FANNIE By Mail: Fannie Mae c/o Treasurer s Office, Fixed-Income Securities Marketing, th Street NW Washington, DC Fannie Mae is headquartered in Washington DC and operates regional offices in Atlanta, Chicago, Plano, Los Angeles, and Philadelphia. Headquarters th Street NW Washington, DC

62 Appendix CAS REMIC 63 CAS 2019-R01 G-fee adequacy analysis 67 Tools for REITs 69 Appraisal waiver 73 How MI works 74 CAS deal summaries and comparisons 76 62

63 Commodity Futures Trading Commission (CFTC) considerations CAS REMIC structure allows transaction to be created in a manner that does not involve swaps Transaction documents are traditional commercial transactions None of the transaction documents will utilize an ISDA or similar agreement The substance of all transaction documents will be commercial (securities and capital contribution) agreements Outside counsel to Fannie Mae and the Issuer will deliver an opinion letter that the transaction does not involve any swaps Since the transaction does not involve any swaps, the Issuer is not considered a commodity pool and, therefore, does not need to register with the CFTC 63

64 Swaps analysis CAS REMIC structure allows transaction to be created in a manner that does not involve swaps For the first CAS REMIC deal, CAS 2018-R07, Fannie received an opinion letter from Eversheds Southerland (US) LLP regarding its swaps analysis. Fannie Mae will receive similar opinion letters for each subsequent issuance Eversheds concluded that the transactions between Fannie Mae and the CAS REMIC Trust are not security-based swaps since they are based on a reference pool of mortgages Eversheds concluded that the both the Capital Contribution Agreement (CCA) and the Collateral Administration Agreement (CAA) between Fannie and CAS REMIC Trust are commercial transactions and therefore should not be treated as swaps The sources of payments on the Notes consist of: (i) investment earnings and liquidation proceeds of short-term, liquid investments held in the Cash Collateral Account; (ii) amounts received in respect of REMIC interests issued by separate REMIC trusts previously established by Fannie Mae and assigned by Fannie Mae to the Issuer; and (iii) additional capital contributions made by Fannie Mae pursuant to the CCA and the CAA, each as further described in the 2019-R01 term sheet Eversheds determined that both the CCA and the CAA should be considered as commercial transactions, supported by the following facts: Fannie Mae s and the Trust s payment obligations are not severable from the transaction No OTC trading (or similar) market exists for the obligations under the CCA and CAA Fannie s contribution of the IO securities from the Q-REMIC have been sized specifically to satisfy all payments under the CAA and are contributed to the Trust for tax (REMIC and REIT eligibility) and securitization structuring purposes For further details/analysis, refer to the CAS REMIC overview on pages and the Good REIT Income slides on pages The CCA and CAA lack various other characteristics that are common in swap transactions, such as: Is not documented like a swap Does not possess the characteristics of a swap (no exchange of payments, no netting, no credit exposure) 64

65 Summary of key tax, legal and regulatory considerations Topic CAS direct debt CAS REMIC Issuer Fannie Mae CAS REMIC Trust, a wholly-owned, non-consolidated subsidiary of Fannie Mae. Fannie Mae is sponsor and depositor Registration Exempt under Fannie Mae Charter Act Exempt under 144A Offering Restrictions Regulation S Sales to REITs Tax treatment Within the U.S.: Notes offered only to Qualified Institutional Buyers as defined in Rule 144A under the Securities Act. Outside the U.S.: Notes offered only to non-u.s. persons pursuant to Regulation S of the Securities Act. CAS are deemed to be government securities for purposes of the REIT tax tests, so are qualifying assets for REITs, but generally are less attractive because they do not produce qualifying real property income for REITs. M1 and M2 are debt for tax B1 is a contingent notional principal contract for tax Within the U.S.: Notes offered only to Qualified Institutional Buyers as defined in Rule 144A under the Securities Act. Outside the U.S.: Notes offered only to non-u.s. persons pursuant to Regulation S of the Securities Act. A REMIC security will be a qualified REIT asset and will produce qualified income for REITs. All tranches are treated as debt for tax 65

66 Tax, legal and regulatory summary (cont.) Sale of B piece Topic CAS direct debt CAS REMIC B piece is generally subject to 30% withholding tax if sold to non-u.s. investors. B piece is treated as debt-for-tax and therefore NOT subject to withholding tax if sold to overseas investors CFTC/Commodity Pool Operator Investment Company Act of 1940 Volcker Rule ERISA eligibility Registration as a Commodity Pool Operator (CPO) is not required. Fannie Mae, as an instrumentality or government entity of the United States, is exempt from registration pursuant to Section 2(b) of the Act. Exempt from the 1940 Act since Fannie Mae is the issuer. Securities are exempt from Volcker Rule since they are not issued in reliance upon an exemption under Section 3(c)(1) or 3(c)(7) of the 1940 Act. Non-rated and below investment grade rated notes are ERISA eligible because they represent either (i) debt for tax or (ii) equity in an operating company (Fannie Mae). Registration as a Commodity Pool Operator (CPO) is not required. As an entity wholly owned by Fannie Mae, the SPV is exempt from registration pursuant to Section 2(b) of the Act. The SPV will be exempt from the Act pursuant to Section 2(b). CAS REMIC notes therefore will not constitute interests in a covered fund for purposes of the Volcker Rule since the Volcker Rule applies only to securities issued in reliance on Sections 3(c)(1) or 3(c)(7) of the Act. The M1 and M2 notes will be ERISA-eligible because they are both able to meet certain criteria to be characterized as debt-for-tax independent of the REMIC election. The B1 is not expected to be ERISAeligible. 66

67 CAS 2019-R01 G-fee adequacy analysis To determine the adequacy of the IO Regular Interest to generate enough good REIT income, we calculate: CAS 2019 R01 (bps on loan UPB) Weighted Average Initial Net G-Fee of the Reference Pool Weighted Average Initial Net G-fee of the Uncovered Q-REMIC loans Weighted Average Initial Net G-Fee of the Overall Population less, Weighted Average Lifetime CAS Margin over LIBOR equals, Weighted Average Lifetime Excess Net G-Fee The Net G-Fee of the Overall Population represents Fannie Mae s contribution of the IO securities from the Q-REMIC to the CAS REMIC Trust. This is interest that is available to pay the margin on the CAS notes The amount of excess Net G-Fee will change over time based on the remaining balances of each of the CAS notes and the relative remaining proportions of Reference Pool Loans and Uncovered Q-REMIC Loans Key risks that could lead to shortfalls in the adequacy of the Net G-Fee income: Due to the sequential nature of the allocation of principal payments, the lower coupon CAS notes (i.e., M1 class) will pay down first, causing the weighted average CAS margin to increase over time Uncovered Q-REMIC Loans could prepay at a faster rate than the Reference Pool Loans, therefore reducing the aggregate Net G-fee available to cover the CAS margin We analyze these risks in more detail on the following page Fannie Mae will be providing ongoing monthly reporting to assist REITs in analyzing the availability of good REIT income 67

68 CAS 2019-R01 G-fee adequacy analysis Base scenario: Assumes Reference Pool Loans and Uncovered Q-REMIC Loans prepay at the same rate Moderate scenario: Assumes Uncovered Q- REMIC Loans prepay faster than covered loans 50 Net Guarantee Fee Income vs. CAS Margin Reference Pool Loans 10% CPR; Uncovered Loans 10% CPR 50 Net Guarantee Fee Income vs. CAS Margin Reference Pool Loans 10% CPR; Uncovered Loans 25% CPR Annualized (in bps) Net G-Fee Premium Month Annualized (in bps) Net G-Fee Premium Month Implications: Even under an assumed Stress Scenario, the Net G-Fee is more than sufficient to cover the CAS margin in order to generate good REIT income This analysis also supports the opinion that the transaction is not a swap, since the IO securities contributed from the Q-REMIC (i.e., the Net G- Fee) are sufficient to cover the CAS margin 68 Annualized (in bps) Stress scenario: Assumes 100% of Uncovered Q- REMIC Loans pay off in first remittance month Net Guarantee Fee Income vs. CAS Margin Reference Pool Loans 10% CPR; Exclude Uncovered Loans Net G-Fee Premium Month

69 New functionality in Data Dynamics 69

70 Good REIT Income: CAS 2019-R01 monthly reporting Fannie Mae will be providing the following monthly reporting to assist REITs in analyzing the availability of good REIT income. 70 Reporting as of the issuance period for CAS 2019-R01